Leases

9 Months Ended

Sep. 30, 2021

Note 12 – Leases

Lease liabilities represent the Company’s obligation to make lease payments and are presented at each reporting date as the net present value of the remaining contractual cash flows. Cash flows are discounted at the Company’s incremental borrowing rate in effect at the commencement date of the lease. Right-of-use assets represent the Company’s right to use the underlying asset for the lease term and are calculated as the sum of the lease liability and if applicable, prepaid rent, initial direct costs, and any incentives received from the lessor.

The Company’s long-term lease agreements are classified as operating leases. Certain of these leases offer the option to extend the lease term and such extensions are included in the calculation of the lease liabilities to the extent the options are reasonably assured of being exercised. The lease agreements do not provide for residual value

guarantees and have no restrictions or covenants that would impact dividends or require incurring additional financial obligations.

The Company assumed five operating leases for real estate in the Bay Banks Merger. In accordance with ASC 842–Leases, the original classification of each lease was retained and not re-evaluated as part of the accounting for the business combination. The Company measured each of the assumed lease liabilities as if the lease was new, determined the appropriate lease liability and right-of-use asset fair value based on the Company’s incremental borrowing rate at merger date, and obtained independent assessments of favorable or unfavorable market terms for each lease contract.

The following tables present information about the Company’s leases as of and for the periods stated.


(Dollars in thousands)	September 30, 2021
Lease liabilities	$	7,113
Right-of-use asset	$	5,645
Weighted average remaining lease term (years)	5.89
Weighted average discount rate		2.18	%


	For the three months ended				For the nine months ended
(Dollars in thousands)	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
Operating lease cost	$	400	$	458	$	1,806	$	1,347
Total lease cost	$	400	$	458	$	1,806	$	1,347

The following table presents a maturity analysis of operating lease liabilities and reconciliation of the undiscounted cash flows to the total of operating lease liabilities as of the date stated.


	As of
(Dollars in thousands)	September 30, 2021
Three months ending December 31, 2021	$	507
Twelve months ending December 31, 2022		1,712
Twelve months ending December 31, 2023		1,330
Twelve months ending December 31, 2024		939
Twelve months ending December 31, 2025		785
Thereafter		2,427
Total undiscounted cash flows		7,700
Discount		(587	)
Lease liabilities	$	7,113